Granite Construction Q2 revenues drop nearly 3 percent, still up for 2015

GVA_CEO
James Roberts, CEO

WATSONVILLE—A challenging start to the year and some dips related to accounting practices on major projects caused second quarter revenues to drop nearly 3 percent from a year ago, Granite Construction executives reported Thursday.

Total company revenues were $569.2 million. Net income was $9.6 million, compared to $13.6 million in the second quarter a year ago.

It was not enough of a decline, however, to shadow the upward trend of total revenues for the year. Revenues for the first six months of 2015 were still up 2.5 percent compared to 2014 — the highest they’ve been since 2009 when the country was in the thick of the recession. Six years ago, the company’s backlog was about 50 percent of the current record $3 billion total.

James Roberts, chief executive officer and president, said he remained encouraged by “the overall solid performance” of the business. Roberts addressed investors and analysts on a webcast conference call Thursday morning.

He said several one-time events that boosted second quarter numbers a year ago, caused a variance for comparing second quarters. Part of the challenge, however, was also slower than expected project ramp-ups and delays due to severe weather in some parts of the country. Accelerated schedules on those projects should make up for lost time on those large projects by year-end, he said.

Large project construction revenue decreased 25.1 percent from last year in the same quarter. On a brighter note, the company’s other two major segments, construction and construction materials, each saw growth for a fifth consecutive quarter. Construction revenue grew 13.5 percent and materials increased 11.6 percent year over year.

The company, Roberts said, is poised to take advantage of an opening in its largest market: transportation infrastructure, which is expected to result from recent state and local funding actions. Long-term funding from a federal transportation bill, which could unleash billions of pent-up demand, continues to be elusive, but nearly a dozen states have pushed their own user-based funding mechanisms since 2013.

“We expect more is on the way at the state and local level,” Roberts said, noting that gas tax revenue declines and more fuel-efficient cars have contributed to a widening funding gap for states.

In California the shortfall is about $5.7 billion annually leading to a huge backlog of repairs to highways and bridges. California legislators are currently discussing the issue in special session.

“It’s encouraging to see that potential progress is being made in Sacramento from both sides of the aisle,” Roberts said. “Now, if only our representatives in D.C. could follow suit.”

In June, The company announced two new executive hires: Robert J. Beekhuizen, from Fluor, as senior vice president of construction and materials; and Richard M. Rantala, from Balfour Beatty, as senior vice president of business development.

AT A GLANCE

GRANITE CONSTRUCTION

WHAT: Granite Construction Inc. is a national civil contractor and construction materials producer, specializing in complex infrastructure projects, including transportation, industrial and federal contracting.

HEADQUARTERS: 585 W. Beach St., Watsonville.

BACKGROUND: Founded in 1922, the company incorporated in 1990.

LEADERSHIP: James H. Roberts, chief executive officer and president.

BASE 2014 SALARY OF CEO & SENIOR VICE PRESIDENTS: $750,000 and $360,000 to $475,000 respectively.

BASE 2014 FEES AND INDIVIDUAL TOTALS OF GRANITE DIRECTORS: $80,000 to $164,281 and $176,519 TO $341,829, respectively.

EMPLOYEES: As of Dec. 31, Granite employed about 1,700 salaried, plus about 1,300 hourly employees, a number that fluctuates seasonally up to about 3,600.

INFORMATION: 831-724-1011; http://www.graniteconstruction.com

STOCK PRICE: GVA shares dropped 37 cents Thursday to close at $34.27. In the last year, shares have traded between $30.44 and $39.09.

FINANCIALS: Second quarter revenue was $569.2 million, compared to $585.87 million a year ago in the same quarter. Profit was $65.8 million, or 24 cents diluted earnings per share, compared to 34 cents a year ago.

PROJECT BACKLOG: Granite reported having about $188.15 million in cash and cash equivalents. The value of the company’s project backlog is a record $3 billion.

GUIDANCE: The company maintained its forecast of mid-single digit consolidated revenue growth for the year.

This article first appeared in the Santa Cruz Sentinel.

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